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When you book an Airbnb room in London, around a third of the $100 saving you make over the price of an average hotel room is due to tax advantages which favour Airbnb’s business model, according to research by the Financial Times.

The price advantage comes at a time when Airbnb is increasingly competing with hotel groups. Research from Morgan Stanley in November reported a higher than expected “cannibalisation of traditional hotels” over the past year, citing survey findings that 49 per cent of Airbnb users in the US, UK, France, and Germany had replaced a hotel stay with a stay booked through the online group.

Airbnb says one of the key benefits of what it calls “home sharing” is to reduce costs for travellers and to help hosts earn extra income. But hoteliers complain they face unfair competition, as a result of tax differences and gaps in regulatory enforcement of everything from hygiene to disabled access and fire safety.

The extent to which Airbnb’s business model benefits from tax advantages is particularly evident in London because the UK has very high rates of business property taxes and value added tax on hotel stays, combined with generous tax exemptions for owners renting rooms in their homes and for small businesses.

VAT and property taxes account for up to 17 per cent of the price of a typical London hotel room, after the recovery of VAT paid on costs. The VAT on most Airbnb stays can be as little as 0.6 per cent because the UK only levies the tax when businesses sell more than £83,000 per year — a threshold reached by very few Airbnb hosts. It is otherwise only payable on Airbnb’s booking and service fees.

Property tax is less than £3 a day for the average London residential home but is often far more expensive for a hotel paying business rates. Tim Beattie at JLL property advisers says business rates could account for between £5 to £8 of a £100 room charge in London. By contrast, John Webber at Colliers International says: “It is very rare that anyone operating through Airbnb will pay business rates.”

These VAT and property tax differences can add up to roughly third of the extra cost of using a London hotel. On average, guests paid $220 a night for a hotel room in 2015 before VAT, while Airbnb hosts received $142, according to the Hotelschool report, which was calculated in dollars. After taking account of hotel room VAT and Airbnb fees (assuming a 10 per cent guest fee and a 3 per cent host fee, plus VAT) the prices were $264 for the hotel room and $164 for Airbnb. The tax differences are worth tens of millions of pounds, based on FT calculations that assume Airbnb’s London bookings were about $600m in 2016.

Airbnb did not comment directly on the FT’s calculations, saying that tax was proportionate to the level of activity provided, not the platform on which accommodation is listed. It suggested it was misleading to compare someone occasionally sharing a spare room with a 200-room hotel with high occupancy rates.

But the threat posed by the Silicon Valley newcomer to the hotel industry’s business model has been underlined by a $30bn valuation in Airbnb’s latest funding round, not far behind the $34bn market capitalisation of hotel group Marriott International.

Airbnb is now directly targeting the business travel market, with hosts able to advertise themselves as “business travel ready” if their property meets certain requirements, such as offering WiFi and a 24-hour check-in. According to Airdna, which provides data on rentals, 51 per cent of all Airbnb properties listed in London are “entire place”, not spare rooms.

In London, Airbnb’s second-largest market by number of listings, its share of overnight stays increased from 2.8 per cent in January 2015 to 7.6 per cent by the end of the year, according to a report by Hotelschool The Hague, Colliers International and AirDNA. Revenues of London hotels fell 9 per cent to $445.6m while bookings through Airbnb rose 182 per cent to $28.6m in January 2016, compared with the same month a year earlier.

Confronted with a backlash from industry incumbents and regulators, the internet start-up has offered to help collect tourist taxes. Since 2014, Airbnb has collected more than $110m in hotel, tourist and occupancy taxes in 200 jurisdictions globally.

Airbnb has also bowed to pressure over planning concerns in residential areas, by agreeing to help enforce annual rental limits. But consumer protection is another emerging issue. David Weston, chairman of the Bed and Breakfast Association, criticises Airbnb for not ensuring compliance with fire regulations. “I think the public assumes some sort of checking if you are booking with a big global brand,” he adds.

By contrast, members of his association with as few as three letting bedrooms have been required to install fully wired fire alarms and fire doors. “We have had instances of people having to spend thousands of pounds,” he says. “It is extremely galling to find that fast-growing competitors are not complying with anything.”

Dr Jim Glockling, technical director of the Fire Protection Association, a UK-wide body that promotes fire safety, says: “It is clear that there will be a need for legislation to catch up with these innovative hostelling methods; competitive services like this should be cost effective by merit of the expansiveness of the supply chain, rather than lowering of customer safety standards.”